They Said What?

IT'S BEEN A WILD RIDE in the corporate-debt and derivatives market lately, with a rush to unwind positions in highly leveraged bets after downgrades of GM and Ford credit. Stock-market volatility, which had been at 10-year lows, has picked up.

Rob ArnottChairman of Research Affiliates "Hedge funds are both....We could see another Long-Term Capital Management. The Fed was 'midwife' in the last bailout, a mistake. If this happens, the turbulence will have many victims."

Alain DeCosterFounder, ABS Investment Management "If you've got everybody running for the exit at once, there's going to be some blood at that exit."

David RosenbergHead of investment solutions, Citigroup private bank "They've been a significant contributor to recent volatility. Event risks, client redemptions and hedge- fund deleveraging have created more risk."

Steve SamuelsPrincipal, Bulldog Investors "It's greedy or dumb investors who leverage up and press for higher returns and take more risk."

Robert ShillerYale economist "Volatility isn't in itself a bad thing. Whenever you have a new technology, there will be people who misuse it. LTCM blew up, but so did the Challenger."

Dow Indicator

Dow Industrials

10140.12

- 205.28

Dow World Index

204.78

- 0.14

30-Yr T-Bonds

4.49

+ 0.11

Market Mayhem

The equity market suffered some steep declines, amid turmoil in structured-credit products. The Dow Jones Industrial Average had two days of 100-plus-point losses, to finish at 10,140, down 205 points on the week. Walter Bressert, who brought the concept of cycles into the futures market, says the worst is yet to come for the broader market. He sees "a classic failure pattern" for the S&P 500, which ended the week off 17 points, at 1154, with a technical downside objective of 1125. "We'll see the bottom fall out if the market fails to rise above the May 9 high of 1178," Bressert says.

Flight to Quality

Deepening hedge-fund losses tied to downgrades at
Ford
and
General Motors
resulted in a flight to quality in the credit markets. The yield on the 10-year Treasury, which moves opposite to the price, fell below 4.13% for the first time since Feb. 16.

Hitting the Wal-Mart?

Wal-Mart Stores
missed Wall Street's forecasts for first-quarter earnings and warned results for the current quarter would be lower than expected. It blamed higher gas prices, an early Easter and a late spring.

George W. Bush, while getting pointers from Vladmir Putin on driving a manual transmission said. "I'm having so much fun, we're going for another lap."

Base Closings

The Pentagon proposed closing 33 major bases and 180 military installations starting in 2006, and estimated savings of $48.8 billion over 20 years.

"Dumb" Deal

Goldman Sachs
' advisory role to the New York Stock Exchange and
Archipelago Holdings
in their proposed merger was probably legal but a "very dumb" business move, SEC Commissioner Roel Campos said. An NYSE seat holder sued to block the merger, claiming breach of fiduciary duty. The NYSE said the suit was "completely without merit."

The Sky Is Falling

Noted investor Stanley Druckenmiller told investors at the Ira W. Sohn investment conference to benefit the Tomorrows Children's Fund that "risk is ridiculously underpriced" and that we face "the greatest probability of an economic problem" like the '75-'82 recession since he's been in business. The upside? The sooner the bubble bursts, the better. "We need to cleanse the system."

Fading Picture?

Eastman Kodak
has about two years to establish its place in digital photography or fade away, said Antonio Perez, named to succeed CEO Daniel Carp.

Cutting Edge

A federal bankruptcy judge approved United Airlines' plan to terminate its pensions, which will save it about $645 million a year. UAL, the parent company, posted a $1.1 billion first-quarter loss, and said it seeks more pay and benefit cuts. And
Delta Air Lines
' stock fell to its lowest level in 25 years after it warned of further losses.

Nice Moves

Retail sales rose 1.4% in April after a punk March. The U.S. trade gap narrowed unexpectedly in March, to $54.99 billion from $60.57 billion in February. The decline, the largest in three years, came on record exports.

Calling All Quotas

The Bush administration said it would reimpose quotas on three categories of textiles from China.

To and Fro

Morgan Stanley
dissidents proposed a spinoff of its investment-banking business; a spokesman called it a "publicity stunt."

Odds 'n' Ends

General Electric
plans to more than double its investment in environmentally friendly products to $1.5 billion by 2010.

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